Streaming titans play the bundling card
Netflix's proposed acquisition of Warner Bros Discovery's studios and streaming unit is expected to reduce streaming costs for consumers by bundling Netflix and HBO Max, according to two people familiar with the proposal.
In recent talks with Warner Bros Discovery, Netflix said combining its streaming service with HBO Max would benefit consumers by lowering the price of a bundled offering, the sources told Reuters.
Netflix's argument is intended to address potential regulatory concerns that merging one of the world's leading subscription video platforms with a major rival could limit consumer choice and raise prices, the sources said. The two services are not currently offered as a bundle.
Warner Bros Discovery has been exploring a sale of all or part of its business, which includes film and television studios, cable networks such as HBO and CNN, and the HBO Max streaming service.
Reuters reported in October that Netflix was actively examining a bid for Warner Bros Discovery's studio and streaming operations, a tie-up viewed as potentially reshaping the streaming landscape.
By framing the acquisition as pro-consumer, Netflix now aims to strengthen its case that the deal could withstand regulatory scrutiny, the sources said.
Reuters has previously reported that Netflix submitted a mostly cash offer for the studio and streaming unit. Other bidders - Paramount Skydance and Comcast - would also use HBO Max, together with the Warner Bros film and television library, to reinforce their own streaming platforms.
If Netflix's bid succeeds, the deal would expand its film and television catalogue. However, the sources said that combining the two services is unlikely to significantly increase Netflix's market share, as most HBO Max subscribers already have Netflix.
The combination of HBO Max and Paramount Skydance's Paramount+ would create a top-tier US streaming service capable of challenging Netflix and Walt Disney's Disney+ in both content volume and breadth, Bank of America media analyst Jessica Reif Ehrlich wrote in a recent report.
HBO Max would similarly boost NBCUniversal's Peacock service, which has yet to become profitable. NBCUniversal is owned by Comcast. "Comcast risks being left behind as PSKY or NFLX scale their streaming services, limiting Peacock's reach and weakening NBC's ability to compete in the global media market over time," Ehrlich wrote.
A successful acquisition would give Netflix control of Warner Bros' vast content library, including the full HBO catalogue, the Warner Bros film archive and DC Comics properties.
"Netflix is the clear streaming leader in subscribers," Ehrlich wrote, adding: "It still lags other media companies on deep IP libraries that could offer potential use cases for theme parks, experiences, Broadway shows, gaming and merchandising."
Even so, Netflix faces political pushback - from Pentagon criticism of its content to warnings by Republican lawmakers that a takeover of Warner Bros Discovery could hand the company excessive control and reduce consumer choice.
Alphabet's YouTube remains the country's largest streaming platform by viewership.